Viant is a big ad tech player, founded by brothers Chris and Tim
Vanderhook. Viant also owns the Specific Media ad network and an
"Advertising Cloud" that connects with a database of
more than 1 billion registered users.

We caught up with Viant cofounder and CEO Tim Vanderhook over the
phone shortly after the deal was announced.

He explained why Viant chose to sell to a magazine company, how
Myspace is about to be revitalized through the distribution of
Time Inc. content, and why the doomsayers on the ad tech
sector have got it wrong because more "traditional" media players
— TV, magazine, and radio companies — are about to flood into the
ad tech space.

Business Insider: How did the deal come about?

Tim Vanderhook: Viant was out raising money. We
started raising money the end of Q1 last year, Q2 I would say,
and we started looking at what we need in our business to
continue to grow. What we still need to address the weaknesses of
our business in the marketplace.

As we went through that process, we were talking to a number of
private equity groups, but then we started to shift our focus.
Money is fine and there's lots of private equity groups with
available capital, but really what we needed was a strategic that
we could pair up with.

We always felt like we had better data than anyone else, this
incredible first-party dataset. We had great programmatic
technology in an ad tech stack that's end-to-end that's been
built over a decade and modified to be for people-based data. But
one of the big things we saw that we were missing was quality
content, or premium content.

Time
Inc. CEO Joseph Ripp described the acquisition of Viant as "game
changing."Time
Inc.

Being able to leverage this data now in such a high-quality
environment of the 60 digital properties Time Inc. has that reach
in the US over 120 million people every single month. Being able
to take this first-party dataset and marry that with a premium
content environment, we saw as a game-changing opportunity.

We engaged with Time Inc. about six months ago when we had our
first discussions with them and they were looking for a
partner that could activate their first-party data that they have
and were looking for a platform that they could get behind to
really target ads in the same way that Facebook and Google are
using registration data. They have the dataset, but they didn't
have the technology platform to be able to activate against it.
We had our own dataset and the technology platform, but we're
missing the quality premium content on where the ads show up on
exchanges that are out there today.

It really was an incredible win-win from us being able to use to
combine Time Inc.'s data set with Viant's dataset, we now have
the size, scale, and accuracy that Google and Facebook have from
a first-party data perspective. But we have married that with
high-quality content that is being produced on a daily basis
across the incredible brands that Time Inc. has. We think the
combination of data and premium content really raises the bar on
the whole ecosystem and changes the entire landscape compared to
third-party cookies, or anonymous segment cookie data that you're
targeting in an open exchange that has very low viewability.

We think this is what the industry needs. Time Inc. was excited
about it and so are we.

BI: That said, you did have a content platform already by
way of Myspace. You were and still are a media owner. If the
private equity money was there, why did you choose to sell to a
media owner rather than take on more cash and build a premium
content destination yourself through Myspace?

TV: Myspace is an incredible amount of
first-party data where you have user accounts, and users are
uploading photos and sharing them, and we manage 15 billion
photos for 1 billion users online, people have written blogs
in the early days of Myspace that we still host and
manage, young and aspiring artists are uploading audio on a
daily basis to Myspace as a platform to reach consumers, and
video too.

Myspace is different. When I say premium content I'm really
talking about storytelling, high-quality editorial that's
representative of Time Inc. Myspace is a great publishing
platform, it has incredible potential to distribute content
across its network and in the social graph that exists across
there

One way we've talked about historically is leveraging the email
addresses that we have at Myspace and being to re-active and
re-touch with consumers. But the key when you do that is having
quality content that a consumer wants to read. And by being able
to plug in Time Inc.'s content into Myspace as well and start
pushing it through, we see synergies.

The
acquisition will see MySpace distributing Time Inc.
content.MySpace

But Time Inc. is a whole different level of quality content that
I think everyone recognizes, this is an iconic company with
iconic brands that have been critical in US history. So being
able to leverage Myspace's distribution capability and marry that
with the content production capabilities that Time Inc. has, and
being able to match marketers' messages using first-party data
really is game-changing and we're exciting to deliver on it.

BI: So in summary: Why try and take on money and hire in
lots of journalists in order to build a media brand yourself,
when there are 94-years of legacy and trust in Time's
brands?

TV: That's right. I mean, look, the reality is
we said we need to move from a pure-play ad tech company. We've
got to have a direct relationship with consumers. It's the only
way to generate first-party data and have that dataset — have a
real property and real consumers that engage with you.

When the Myspace acquisition came around: You can't replicate
Myspace. Can someone replicate or an invent an app in the world
that reaches 1 billion users? Certainly it's in the realms of
possibility but a very low probability. You also simultaneously
can't just invent another Time Inc. The level of quality content,
the amount they produce, the brand that they have and the
consumer awareness that they have over a 94-year history can't be
replicated and that's why I say Time Inc. is in a league of its
own when it comes to quality content and everyone recognizes
that.

BI: What happens with yourself, Chris [Vanderhook, Tim's
brother and Viant cofounder and COO] and the Viant properties? Do
those continue on autonomously? Do you continue on autonomously?
Or are you becoming part of Time and some of these properties
might be rebranded?

Chris Vanderhook and Tim
VanderhookFrederick M. Brown/Getty
Images

TV: No, not at all. We are a 100% independent company. We are run
by our own board of directors. Chris and I wouldn't have done
this deal if we were going to sail off into the sunset. We are
incredibly excited and passionate about the opportunity of
putting Time Inc. and Viant together, so we will remain as CEO
and COO of Viant

What the announcement means today is that our product just got
simply better. If you loved the dataset that Viant Inc. was
offering last year through the Ad Cloud, you're going to be even
more excited now we're able to pull Time Inc's 60 properties and
all of the subscriber data they have as well too. That is a huge
boost and a shot in the arm for Viant in being able to grow our
database to rival that of Facebook and Google. That's one area
we're really excited about.

The second area is really being able to look at the premium
content opportunities and being able to marry it up with that
dataset. That is something that, when we deliver it into the
marketplace, people are going to recognize this really was a
game-changing day when Time Inc. made this decision to get behind
Viant and really contribute significantly to the strength of the
assets they have. It makes them a huge player in digital
advertising and I think it's really going to change the way
people look at Time Inc. and look at Viant.

To directly answer your question: We're not going anywhere.
We're not Time Inc. employees. We are employees of Viant, which
is a subsidiary of Time Inc. — I don't know, maybe I'll have to
sign a Time Inc. employment agreement, I'm not sure how that
works. But we have no intention of going anywhere and we report
to a board of directors. Our board changes out a bit more now
with Time Inc. doing this transaction.

Time
Inc.'s brands range from Fortune to Horse &
Hound.Time Inc.

BI: Can I ask more about the transaction itself? Was it
an all-cash deal? What were the terms?

TV: Unfortunately, since Time Inc. is
public company, I have to defer everything around the transaction
to what they've chosen and they've chosen to not disclose any of
the terms of that transaction. Any of the terms would have to run
by them due to the public nature of that company.

BI: What do you think this transaction says about
the ad tech market in 2016? Lots has been written by the
doomsayers when you look at the majority of public ad tech
stocks, and there haven't been many big exits for quite some
time. Do you think this deal will help people look on the ad tech
market in a different light, or do you think actually this isn't
reflective of the market at all?

TV: I would say there's a couple of issues in
the ad tech ecosystem in general. I think the majority of the ad
tech community when you read the trades, and look at the
positioning of companies, and the products, and the technology
positioning, there has been a huge investment in laying the pipes
and the plumbing in what you see.

Really what most companies bet on is that value creation will
happen through pipes and plumbing. I think what you're seeing is
that pipes and plumbing means a commodity and it's not really
about pipes and plumbing — those are important — but when you
have hundreds of companies that have laid the same pipes and the
same plumbing that feed into exchanges, you have a commodity
situation.

The value-creator in ad tech is not around the pipes and
plumbing, it's around data and content. When you take first-party
data, that's the highest-value data set. If you use third-party
data, it's better than not having any, but it doesn't equal
first-party data. I think Facebook and Google's revenue can
clearly be attributed to first-party data.

I know our success in 2015, we went from 0% of our revenue being
people-based revenue — it now represents 40% of our revenue in
just 12 months. Marketers are flocking towards first-party data,
there's a general desire and need to really leverage that.

I think beyond just data, though, you need even more, which is
why we went with Time Inc. I think more ad tech entrepreneurs and
companies out there today will start to recognize you really do
need a partner. You can't just be an ad tech company, you've
either got to be a publisher, you have to have a deep and diverse
relationship with consumers, with advertisers, with data
providers, all kinds of different companies that are out there.
It's tough for one company to do that.

Everyone's grappling with low quality, so you're hearing a lot of
talk about deal IDs and private marketplace transactions coming.
What that means is it's a flight back to quality. Open ad
exchanges are riddled with low quality and it's pushing marketers
back to premium content. But they're not going to just go back to
content without data. They still want the data, the targeting,
the measurement system that the ad tech community has created.
They just want their ads to show up in a high-quality environment
they can trust.

And that's really what this transaction means. First-party data,
high-quality premium content, and advertisers still get the
benefit of everything from a data perspective but get that safety
and security from 60 trusted brands from Time Inc. Of course
we'll still remain independent and work with other publishers but
Time Inc. is contributing its data and content to Viant to
strengthen our positioning in the marketplace. That will attract
more data providers, more high quality content providers to Viant
and that's going to create a great place to transact.

BI: Something some marketers and agencies do worry about
is this idea of walled gardens — particularly Facebook and
Google, they are the media owner but they also own all sides
of the ad transaction. This is where you're moving towards, it's
where Verizon is moving towards. Do you think these are,
ultimately, the players that are going to win? Those that own
every part of the stack?

TV: Point solutions will have a tough time and
you will see a consolidation of point solutions going into an ad
tech stack. I think you're going to see the ad tech stack
consolidated by media companies that have high reach and high
quality.

But I don't predict doomsday for ad tech whatsoever. It's the
exact opposite. Everyone looks at the ad tech community and
says there's too many companies, there's too much fragmentation.
But ad tech is the monetization layer of the internet. The
model of the internet is ad-supported today. You're seeing
subscription-based services like of course, Netflix being the
most successful, you're seeing subscription-based services have
success, but the entire internet is funded by the ad tech
community.

I think what you're faced with today is the lack of M&A
that's really happened in the ad tech [market] — of course Tim
Armstrong at AOL was very acquisitive, we built our business
under acquisition which is now being consolidated under Time Inc.
— but I think what you're going to see is point solutions
integrating into an ad tech stack, then a complete ad tech stack
going into media companies to be able to marry these things
together.

That's the advantage that Google and Facebook have on the entire
industry. They're not a point solution, they are everything from
start to finish. I think the lack of M&A we've seen today is
because of traditional media companies figuring out how they
participate in the transformation to digital and really thinking
about what assets they need.

I think M&A is going to explode in the coming years,
especially within the ad tech community. You've got a whole bunch
of companies that are generating billions of dollars in
advertising through traditional channels. As that transitions to
digital, they're going to need the technical infrastructure, the
expertise of the people, and the know-how of data management and
that's going to lead to a ton of entrepreneurs in ad tech getting
exits and they're going to be great prices and it's going to
continue this monetization layer on the internet of ad-supported.

I think when the media companies get a better recognition of what
assets they need — and it's not that they're not smart, they're
just being prudent in the shift from traditional to digital about
what the assets are. Even in the ad tech community, people are
confused on what's going to win.

I think it's first-party data and premium content, but I think
for the media companies, once they identify it, a whole host of
buyers that are not considered ad tech today are going to enter
the market. These are TV companies, radio companies, magazines,
anyone who has hundreds of millions or billions of dollars in
traditional advertising is a buyer of ad tech.

The value of the majority of ad tech stocks were on the
decline last year.LUMA
Partners

So I'm hugely bullish on ad tech M&A ... to me this doomsday
scenario of ad tech, because the stock market is temporarily
devaluing these companies is absolutely ridiculous. The internet
doesn't exist without the ad tech community and the issue I think
from an investor perspective is understanding the unique value
that companies bring to the table. And when they can't understand
it, they simply don't buy the stock and stay away, and we're
seeing that reflected in the prices today. It's a lack of
understanding, not the lack of importance of the community.